How will India’s Smart Cities project fare in Modi’s new term?

The project was hailed as a bold and necessary step to cope with India’s rapid urbanisation

June 19, 2019

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After Prime Minister Narendra Modi won a second term to lead India, all eyes have moved onto the policies his government implemented in the last five years. Among the most high-profile: the US$30 billion Smart Cities Mission (SMC).

Launched in 2015 to improve sustainability, provide affordable housing and tackle other issues to ensure a “citizen-friendly” environment across 100 cities, it was hailed as a bold and necessary step to cope with India’s rapid urbanisation.

Four years and some 5,000 projects later, there have been breakthroughs. For instance, New Delhi Municipal Council has managed to switch its electricity meters to smart meters, a move that would save the city US$1.7 million a year by eliminating data entry errors.

But problems remain, from sanitation to traffic congestion. Citizens living in some of the chosen “smart cities” point to the fact that there has been no significant improvements thus far.

“The Smart Cities Mission has done good on different fronts, but there is still a ways to go,” says Samantak Das, Chief Economist and Head of Research & REIS, JLL India. “Modi winning another term is a reassuring factor in bringing a level of consistency to the government’s policy goals.”

To kick off his new term, Prime Minister Modi declared a 100-day agenda to relook his flagship programmes, which includes Smart Cities Mission. The Ministry of Housing and Urban Affairs proposed a complete revamp of the scheme and has plans to expand beyond the first 100 cities.

The policy “needs to inspire more confidence in citizens and better deliver on its initiatives,” Das says. “The government has to showcase the progress made in terms of initiatives. At the same time, better co-ordination with all stakeholders is required to ensure that funds are properly used to get projects off the ground.”

Addressing challenges

The cities of Surat and Pune are touted as smart-city success stories. Surat has the most number of smart cities initiatives implemented so far, while Pune stands out for its introduction of synchronised traffic signals across the city to ease traffic flow for pedestrians and commuters as well as its smooth adoption of digital payments system.

But these are not the norm. There are several issues at play, including getting the right resources in place.

“To get a smart city going in requires new processes and people like a project management consultant and implementing bodies and organisations to push initiatives through,” says Das. These can take anywhere from 15 to 18 months to set up in each city.” According to Smart Cities Mission’s officials, the first 20 cities will be ready only in 2021.

Once that is done lies another set of challenges. Das adds that the Special Purpose Vehicle specially created to “plan, appraise, approve, release funds, implement, manage, operate, monitor and evaluate the Smart City development projects” is often at odds to the local government, leading to poor governance, significant tension at ground level and hampering implementation.

Doing more in Modi 2.0

The public-private-partnership model for the Smart Cities Mission could be improved in the new term, Karlekar says. As cities traditionally need multiple investors and face an uphill battle in getting private investment to back such smart cities projects, he suggests the government look at providing innovative financial structures to ensure the participation of the private sector.

“For instance, a long-term revenue model with annuity option could lock in the participation of private sector players as they benefit from the growth of the city,” he says. “Alternatively, greenfield development projects could prove particularly attractive for private investors to provide innovative solutions.”

In the meantime, the new government has pledged to spend US$1.4 trillion on roads and other urban infrastructure over the next five years, which will be a boost for Smart Cities.

“Infrastructure spending will need to focus on mobility, energy and housing. The government has to ensure that infrastructure meets three objectives – improving the quality of life, economic competitiveness, and sustainability. Only then can India’s cities be on their way to being truly smart.”